General Steel Holdings, Inc. (GSI)

[eastunder]

General Steel Files 2011 Annual Report on Form 10-K

Friday , February 15, 2013 16:53ET

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BEIJING, Feb. 15, 2013 /PRNewswire/ -- General Steel Holdings, Inc. ("General Steel" or the "Company") (NYSE: GSI), one of China's leading non-state-owned producers of steel products and aggregators of domestic steel companies, today announced that it has filed its Annual Report on Form 10-K for the year ended December 31, 2011 with the U.S. Securities and Exchange Commission (the "SEC"). The Company's independent registered public accounting firm, Friedman LLP has expressed an unqualified audit opinion on the Company's annual financial statement for the 12 months ended December 31, 2011.

With the filing of this Annual Report on Form 10-K, the Company believes it has met the New York Stock Exchange's ("NYSE") extended deadline and expects to regain compliance with the NYSE's continued listing requirement for annual report filings under Section 802.01E of the NYSE Listed Company Manual.

"The filing of our 2011 Annual Report demonstrates our commitment to proper financial reporting, and is the result of a concerted effort by our finance team and audit firm partners. Although the review and audit process for our 2011 financial statements took much longer than originally anticipated, we are pleased that we will regain compliance with the NYSE's Annual Report listing requirements," said Henry Yu, Chairman and Chief Executive Officer of General Steel. "Moving ahead, we will continue to focus on our business while we work diligently to prepare our 2012 financial statements and bring General Steel fully current in its SEC filing obligations. Again, I would like to thank our team for their tremendous work and dedication to completing this process, as well as our shareholders for their ongoing support of the Company."

Full Year 2011 Financial Review

-- Total crude steel production capacity under management was 7.0 million
metric tons per annum as of December 31, 2011.
-- Total sales increased 89.4% year-over-year to $3.6 billion, from $1.9
billion in 2010. The increase was attributable to both higher sales
volume and increased average selling prices.
-- Sales volume for the year totaled 6.2 million metric tons, an increase
of 2.3 million metric tons, or 58.1%, compared to 3.9 million metric
tons in 2010, with an average selling price for rebar of $635 per ton in
2011, compared to $526 per ton in 2010.
-- Gross loss was $(88.2) million, representing a gross margin of (2.5)%,
compared with gross profit of $31.4 million, or a gross margin of 1.7%
in 2010. The gross loss in 2011 was mainly attributable to a sharp
increase in the cost of iron ore and coke, the Company's primary raw
materials, in the fourth quarter.
-- Selling, general and administrative expenses totaled $91.8 million,
compared with $52.6 million in 2010. This increase was mainly related to
operational expansion and an increase in production and shipping volume,
which led to an increase in transportation and sales agent charges.
-- Loss from operations totaled $(180.0) million, compared with a loss from
operations of $(21.2) million in 2010.
-- Finance expenses for the year ended December 31, 2011 increased to
$115.0 million, compared with $51.3 million in the year-ago period. The
increase was primarily due to $27.7 million of non-cash capital
financing costs, and a $36.0 million increase in interest expense from
increased bank borrowings.
-- Net loss attributable to the Company was $(177.2) million, or $(3.24)
per diluted share, compared with a net loss of $(30.0) million, or
$(0.56) per diluted share in 2010. The year-over-year increase in net
loss was primarily related to the negative gross margin resulting from
the fourth quarter raw material price increases, an increase of $36.4
million in inventory impairment, an increase of $39.3 million in
operating expenses from expanded operations and higher production and
shipping volume, as well as an increase of $63.7 million in finance
expenses from increased capital lease and interest expense on bank
borrowings. In addition, the Company determined that the net operating
loss carryforward may not have been fully realizable in the second
quarter of 2011 and provided 100% allowance charges of $15.4 of deferred
tax assets carried over from 2010.

Fourth Quarter 2011 Financial Review

-- Total sales increased 69.9% year-over-year to $793.5 million, compared
with $467.2 million in the fourth quarter of 2010. The increase was
attributable to both higher sales volume and increased average selling
prices.
-- Sales volume for the fourth quarter of 2011 totaled 1.6 million metric
tons, an increase of 0.7 million metric tons, or 77.8%, compared to 0.9
million metric tons in the fourth quarter of 2010.
-- Gross loss was $(150.7) million, representing a gross margin loss of
(19.0)%, compared with gross profit of $4.7 million, or a gross margin
of 1.0% in the fourth quarter of 2010. The gross loss in the fourth
quarter of 2011 was mainly attributable to a year-over-year increase in
the cost of iron ore and coke, the Company's primary raw materials, that
exceeded the increase in the average selling price of the Company's
products.
-- Selling, general and administrative expenses totaled $26.0 million,
compared with $17.2 million in the fourth quarter of 2010. This increase
was mainly related to operational expansion and increased production and
shipping volume, which led to an increase in transportation and sales
agent charges.
-- Loss from operations totaled $(176.6) million, compared with a loss from
operations of $(12.5) million in the fourth quarter of 2010.
-- Finance expenses for the quarter ended December 31, 2011 increased to
$42.6 million, compared with $13.7 million in the year-ago period. The
increase was primarily related to $18.6 million of non-cash capital
financing costs, and a $10.4 million increase in interest expense from
increased bank borrowings.
-- Net loss attributable to the Company was $(131.5) million, or $(2.38)
per diluted share, compared with a net loss of $(18.6) million, or
$(0.34) per diluted share in the fourth quarter of 2010. The
year-over-year increase in net loss was primarily related to the
negative gross margin resulting from raw material price increases, as
well as an increase of $36.4 million in inventory impairment, an
increase of $8.8 million in operating expenses from expanded operations
and higher production and shipping volume and an increase of $29.0
million in finance expenses from increased capital lease and interest
expense on bank borrowings.

Balance Sheet

As of December 31, 2011, General Steel had cash and restricted cash of approximately $518.2 million, compared to $263.1 million as of December 31, 2010. The Company had an inventory balance of approximately $297.7 million as of December 31, 2011, compared to $453.6 million as of December 31, 2010. As of December 31, 2011, the Company had total liabilities of approximately $3.2 billion, compared to $1.7 billion as of December 31, 2010.